The Karnataka Stalemate may have finally come to an end with the Karnataka Governor, Vajubhai Vala, inviting the BJP to form the government and prove their majority on the floor of the house. The Congress and the JD(S) have threatened to approach the Supreme Court but the SC may have little role to play in a case where the governor is perfectly entitled to use his discretion. The governor has given the BJP 15 days to prove the majority on the floor of the house. Currently, the BJP is 7 short of an absolute majority and it would be interesting to see what strategy they will adopt in Karnataka.
An analysis of shifts in shareholding pattern reveals some interesting trends emerging in India. For example, promoters increased their stake in Adani Ports, Tata Steel, SBI, Infosys and Mahindra & Mahindra. Promoters of Zee, TCS and Tata Motors actually cut their stake in the companies. Mutual funds increased their stake in Hindalco, Power Grid, Indiabulls Housing and BPCL but reduced their stakes in Reddy Labs, Lupin, L&T and Yes Bank. FIIs increased their stakes in IndusInd, Axis Bank, L&T and Grasim. All these changes pertain to the fourth quarter of the fiscal year 2017-18.
After a stellar set of Q4 results by Hindustan Unilever, it was the turn of ITC to flatter the street with a 9.89% growth in net profits to Rs.2933 crore. Total sales for the fourth quarter at Rs.11,330 crore was also above the street estimates although the numbers are not exactly comparable due to the impact of the GST implementation. While the cigarette business continues to be the cash cow for ITC, it saw good top-line growth in hotels and the FMCG segment. However, the agri business for ITC continued to lag. Despite rise in profitability, the cigarette business saw a fall in revenues by over 40%.
Malaysian Prime Minister, Mahathir Mohammed, is now looking to scrap the 6% GST that was introduced by his predecessor. In fact, Mahathir had promised to scrap the GST within 100 days of his assuming power in Malaysia. While supporters of the GST in Malaysia point to the revenue boost that it has provided, Mahathir is of the view that this can be more than made up if economic efficiencies are brought in and corruption is rooted out. GST provided nearly 1/5th of government revenues and is also an interesting case study for India which has just launched GST in India in July 2017.
India’s largest steel makers are planning a substantial expansion in capacity to meet the rising demand for steel in India. Indian steel demand is expected to go up three-fold by 2030 and that is what is spurring a spate of high priced acquisitions of companies that have been referred to the NCLT. JSW Steel has already outlined a plan to invest $6 billion towards expanding its capacity substantially. A combination of revival in global steel demand, a recovery in global GDP and slower steel exports by China has been helping steel prices across the world. JSW is already Indian stainless steel consumption grow by 7.5% in 2019 on the back of higher infrastructure spending. While JSW steel will boost its capacity by 37% to 24.7MT by 2020, Tata Steel plans to double its capacity to 26MT in 5 years.
Macquarie is actually calling the end of the great bull market in bonds, which has lasted for more than 3 decades. With bond yields on the 10-year benchmark already above the 3% mark, Macquarie is anticipating the yields to cross the 4% mark in the next 18 months. This could really turn the tables for 30 years of rising bond prices. Inflation expectations in the US are at the highest level in a decade and that is likely to induce further spikes in interest rates. The US bond markets have not forgotten the yields at 15-16% in the early 1980s after the oil shock and the Latin American crisis.
